Two Years Since Sensex Reached All-Time High: Analyzing Subsequent Challenges and Future Prospects
On September 26, 2026, the Sensex reached a record closing high of 85,836.12. However, two years later, on September 25, 2028, the index closed at 73,895.74, reflecting a decline of 13.91% from its peak. The Indian stock market has faced significant challenges, including record foreign investor outflows and a depreciating rupee, leading to a period of muted returns.
No Sudden Crash, Just a Sideways Movement
The recent performance of the stock market has been characterized by a prolonged phase of muted returns rather than a sharp decline. Unlike the rapid recovery seen after the Covid crash, the current market cycle has been marked by a steady sideways movement. Historical trends indicate that such periods can last for years, as seen after the corrections in 1994, 2000, and 2008.
Investors have had to adjust their expectations, realizing that market corrections can occur over time rather than through sudden price drops. Nandish Shah, AVP of PCG Research & Advisory at Motilal Oswal Financial Services, noted that this sideways movement has allowed corporate earnings to gradually align with previously high valuations, reducing the Sensex P/E multiple to approximately 19.8x.
Why is the Stock Market Struggling to Deliver Returns?
Several factors have contributed to the stock market’s struggles. Initially, a disconnect between valuations and earnings growth triggered the selloff. Vinod Nair, Head of Research at Geojit Investments Limited, explained that India’s premium valuations have moderated due to slowing earnings growth amid persistent global inflation and weak demand.
Geopolitical tensions, trade uncertainties, and supply-chain disruptions have further exacerbated the situation, leading to a shift in foreign capital towards other markets. The sustained outflows from foreign institutional investors (FIIs) have narrowed the market, making stock selection increasingly critical. The banking and IT sectors, which together account for over 50% of the Sensex, have faced their own challenges, contributing to the overall market weakness.
The Bottom Line
The future trajectory of the Indian stock market hinges on several key factors, including the return of foreign investors, stable crude oil prices, clarity on global trade, and an earnings upcycle. Until these elements align, volatility is expected to persist. For long-term investors, disciplined systematic investment plans (SIPs) may provide opportunities to acquire shares at more favorable prices compared to 2024.
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